Examining the Effects of Performance Monitoring and Performance-Based Pay on Honest Behavior
39 Pages Posted: 15 Aug 2015
Date Written: August 14, 2015
As the workplace grows more complex, employers increasingly rely on information provided by frontline employees and managers. For this reason, honesty is an increasingly important topic in the business literature. We investigate the effects of two environmental variables on behavioral dishonesty. Using 88 participants in a 2×2 experimental design, we manipulate the presence of performance-based pay (PBP) and performance monitoring (PM) in the work environment. Once the participants are accustomed to their assigned work environment, we test for dishonesty across treatment groups by letting the participants privately roll dice to determine the size of a bonus gift card. We find an interaction effect of PBP and PM on dishonesty, where dishonesty is highest for those who were exposed to PBP but no PM, lowest for those who were exposed to both PBP and PM, and in between for the other two conditions. Additional analysis from our exit survey confirms that the effects of “feeling monitored” on honesty is dependent on compensation type. Explanations and implications are discussed.
Keywords: Performance-Based Pay, Compensation, Performance Monitoring, Internal Controls, Honesty
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